In its Mortgages Market Study interim report, the regulator said the current sales process, both direct and via an intermediary, could be improved.
“We believe there are considerable opportunities for firms to enhance the services they offer, innovate, and simplify the mortgage buying process for consumers,” it added.
It argued that earlier access to product eligibility information for consumers would allow them to shop around on a more informed basis and by different methods.
“As noted, we have not seen innovation in mortgage distribution to the same extent as in other markets,” it continued.
“But it is encouraging to note that there has been some recent progress among intermediaries developing tools and lenders partnering with them. We want to ensure that innovation already under way is not curtailed by FCA intervention.
“We hope the recent progress in this market will lead to new or existing intermediaries developing tools that allow consumers to understand at an early stage the products for which they will qualify,” it added.
Not for all
The regulator emphasised that using such tools would not be suitable for all customers, that many borrowers would need face-to-face advice, and that these tools could also support traditional methods of sale.
For example, with a consumer-facing technology tool, when presenting products after the fact-find, it could then route the borrower to particular intermediaries such as in the case of exclusive deals.
And they could help consumers to address ineligibility reasons by providing tailored feedback, such as not having a large enough deposit or having a poor credit score, and suggesting how to improve the issue.
However, the regulator acknowledged that developing these tools was dependent on lenders providing intermediaries with the necessary information.
“The provision of information by lenders to intermediary firms in order to develop such tools should also incentivise lenders to improve their own direct offerings and make better information directly available,” the FCA continued.
“At present, consumers who go to a lender directly on an execution-only basis are to some extent reliant on the limited eligibility and affordability information provided online by that lender.
“As well as improving consumers’ decision making when buying a mortgage, we think that innovative tools could also help consumers make comparisons across products,” it added.
In its report the regulator asked what would be necessary for this approach to work and added: “What would be required to ensure that lenders can provide intermediaries with the means of identifying (earlier) products for which consumers qualify?
“Are there any technical barriers to further development? What is needed to give consumers meaningful outputs, even if they don’t qualify for products?”
Responses on the proposals must be received by 31 July and can be sent to MortgagesMarketStudy@fca.org.uk.